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Selling
5 Steps to Get Ready to Sell
February 18th, 2010 Categories: Selling
Declutter: Remove the “Stuff” in Your Home
This can be the most time-consuming and most important thing you do to help sell your home. “Stuff” in your home works against you in several ways. Stuff takes up space – space in your closet, space in your bedrooms, space in your primary living areas. In effect, stuff we’ve collected can make our home seem much smaller than it actually is. You don’t want buyers to think “The closets are too small”, “the living area is too cramped” or “there’s no room for a media center in the basement”. Buyers only know what they see. You don’t want them to see small, stuffy spaces because of your stuff.
Stuff is distracting. Buyers can’t help it: they will will look at your things. They’ll look at the pictures, the books, the Nick Knacks and everything else. You want them to see the gleaming hardwood floors, the high ceilings and the great view of the back yard. A home full of clutter will easily steal the show distracting buyers from your home’s best features.
And let’s be honest: most of this stuff should be given away or thrown-out. Why pay to move and store things that you really don’t need? Sounds simple enough, but it’s often difficult to discard items that aren’t trash, but really don’t have much value. And, it can be hard work getting this stuff out of the house. Listing items for free on Craigslist can be a great solution. Families who really need your old furniture, toys, bikes and the like will have a need for it — and they’ll come and get it. If you have boxes of personal documents that can’t go out with the trash, plan to bring them to our 2010 Shred Event.
Paint
Painting walls a neutral, warm color brightens a room and gives a home a clean look. Fresh white paint on ceilings and trim make an even bigger impact. Light, earth-toned colors are the way to go. As a rule, avoid blues, greens and reds. However, professionally coordinated paint that’s in great condition does not necessarily need to be repainted.
What about wallpaper? If the wallpaper is shiny, really busy or peeling, then it should be removed and the walls should be painted. As a rule, wallpaper in small rooms like bathrooms should often be replaced even if it’s in good condition since most wallpaper patterns make small rooms seem even smaller. If a room has wallpaper that’s in great shape and it doesn’t overwhelm, then it doesn’t necessarily need to be replaced.
Carpet and Flooring
When carpet needs to be replaced, here’s what we hear from clients – “I’ll just give the buyer a credit so they can select what the want.” This is absolutely a common-sense, logical expectation. However, in practice, this isn’t the way to go for several reasons. Buyers only know what they see. When a buyer sees a home with new carpet, they see a clean, well-maintained, quality home. Impressions are important. When they see a room with old, dirty carpet that’s not in great shape, the see a home that hasn’t been maintained.
Also, with a credit, your buyer will assume that carpet is much more expensive than it really is.
What about hardwood and ceramic tile? Clean your hardwood floors as best you can. If the floors need to be re-finished, then your home will definitely look better if you take care of this yourself. Granted, this can be quite a hassle when your home is full of furniture. This is something that we advise on a case-by-case basis. For ceramic flooring, clean and re-grout where needed. Make them look as good as possible.
Garage and Unfinished Basements. A fantastic way to improve the look of an unfinished basement is to paint the concrete floor a utility-gray color.
Clean, Clean, Clean
Buyers know what they see. Even if your home could use some updates, if it’s clean, buyers are given the impression that it’s well-maintained. The kitchen and baths should sparkle. Also remember to clean light fixtures and make sure that all light bulbs are working. Cleaning windows and removing screens bring in more light. Buyers love bright, clean spaces.
Curb Appeal Matters
From the first step out of their car, buyers immediately begin to form an opinion of your home. External wood trim should be in good condition, shutters in great shape and the front yard should be nicely landscaped. Make it look good – you only have one chance to make a good first impression.
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If you can only do five things to prepare your home, that’s your list. Want even more tips? Let us send you a Free Home Sellers Guide with even more guidance. Of course, contact us and we will be happy to take a tour of your home, give you specific advice and recommend painters, contractors and handymen.
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Top 5 Myths About Home Inspections in Montgomery County
December 1st, 2009 Categories: Buying, Selling
A buyer can only void a contract if a home inspection reveals serious/legitimate issues
The typical home inspection contingency allows a buyer to either negotiate home inspection items or void the contract and have his escrow deposit returned within a negotiated time frame (usually 7 to 14 days). Absolutely no reason has to be given for voiding the contract: none, nada, zip. Is that fair to buyer and seller? Absolutely. Ultimately, only the buyer’s opinion of the property matters. Imagine what would happen if the buyer had to provide a “legitimate” reason to void the contract. A buyer’s and seller’s definition of “legitimate” would rarely line-up. Since the buyer is the one taking possession, his opinion is the only one that matters. Is this a way for a buyer to back out of a contract for no reason? Yes, it is. It does happen, but not that often.
A buyer has only one opportunity to inspect a home
Typically a buyer will have only one inspection from a licensed home inspector, but a buyer could have several at his discretion provided they are completed within the agreed-to time limit. The best strategy is to have the primary home inspection completed as early as possible. If that inspector discovers evidence that requires more specialized inspections (e.g., evidence of potential structural issues, mold, etc), then a buyer has time for follow-up inspections. I’ve also had a general contractor come through a home to review specific issues to help estimate the cost of repairs.
A seller isn’t required to fix anything from an inspection — everything is negotiable
Not true. Both standard contracts used in Maryland (the Regional Contract and MAR Contract) have a “Property Condition” paragraph that states that the “Seller warrants that, except as otherwise provided, the existing
appliances, heating, cooling, plumbing, electrical systems and equipment will be in normal working order as of the Possession Date.” If the buyer’s inspection reveals that the garbage disposal and two GFCI outlets aren’t working, then the buyer only has to give the seller notice to repair these at the seller’s expense – no negotiation required. Same for a leaky faucet or any other item that falls under the Property Condition paragraph. What about the crack in the drive and the roof leak? These repairs must be negotiated between buyer and seller.
A seller must resolve any issues discovered at final walk-through before settlement
This one depends on the item. The seller is required to deliver the home in the same condition as of the Contract Date. As a common example, a buyer may only notice that hardwood flooring is much darker under area rugs removed by the seller after he has moved out. The seller is not required to remediate since the flooring hadn’t changed since the contract was written (hint – always look under rugs before you present your contract!). If the furnace or clothes dryer isn’t working properly at walkthrough, then the seller must address these items regardless if they were working during the home inspection. Again, the Property Condition statement is the guide — electrical, systems and plumbing must be in normal working order as of Possession Date.
A seller is responsible for existing issues discovered after settlement
In most cases – no. When a buyer takes possession of a property, there is no warranty provided by the seller. After settlement, the home — and all of its issues — are the buyer’s responsibility. A buyer can buy a home warranty from a third party for around $400 to help protect them from problems with systems, appliances and plumbing; but a buyer rarely can go back to seller to repair defects that were present in the home before the purchase. This re-iterates the importance of a rigorous home inspection before possession transfers.
Here’s the exception. What if the seller knew about material issues with the home that an inspector couldn’t readily observe and didn’t disclose to the buyer? This is a latent defect, and the seller is required to disclose all known latent defects to the buyer. Pin hole leaks in the plumbing or a basement that leaks water in certain circumstances could be good examples. The difficulty for the buyer is to prove that the seller knew about these problems and did not inform the buyer. If the buyer can prove the seller had this knowledge (from speaking to neighbors, previous owners, etc.), then they would need to get lawyers involved and then work this through the legal system.
Set your expectations properly before your contract is ratified
A sales contract specifies all responsibilities for the buyer and seller for a particular sale, so these guidelines will not apply to all contracts. The key lesson here: understand the contract language when you are negotiating a sale. Don’t zip through the paperwork and assume that you know who’s responsible for what. If you are a seller and you know that certain appliances or systems have issues, either fix them, or make sure they are sold “as-is” in your property inclusions. The bottom line: don’t wait until after your contract is ratified to think about how you will handle issues that are inevitably revealed by a home inspection.
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Having experienced, expert guidance to ratify a contract and get it to closing is imperative for a smooth sales process. Contact us when you need representation to buy or sell a home in Montgomery County, Maryland.
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Is It Time to Move-up in Montgomery County, Maryland?
November 9th, 2009 Categories: Buying, Selling
The U.S. Government thinks so. Last week, the $8,000 first-time homebuyer credit was extended and enhanced to provide a $6,500 credit to current homeowners who purchase another home as their primary residence. Here’s the basics for the move-up credit:
- A ratified contract must be in place by April 30th, 2010 and close by June 30th
- Home purchases over $800,000 do not qualify
- A buyer must be in their current home 5 of the last 8 years
- The buyer’s income must be below $125,000 or $225,000 for married couples
- The credit can be claimed on your 2008 or 2009 return
Unfortunately, there’s quite a bit of fine print with this credit. The National Association of Home Builders and IRS have FAQs to review. You should also talk to your accountant to make sure you qualify.
Contact us if you are planning a move in the coming months and we can help you get started.
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Going from ‘Ratification’ to ‘Settlement’
October 20th, 2009 Categories: Buying, Selling
Once a Buyer and Seller ratify a sales contract, they must jump through a few hoops for ownership to finally transfer. In this video, I’ll walk through the steps of a typical contract. There’s a zillion ways to mix and match terms to meet the requirements of the Buyer and Seller, so each contract is different. This video will help give you a framework for what to expect.
Here’s an overview of the steps outlined in the video:
Steps Tied to the Ratification Date
- Your contract is ‘Ratified’ when the buyer and seller agree to the sales price and all terms. It typically takes 30 to 45 days for a contract to settle.
- Several activities are tied to the ‘ratification’ date. Don’t confuse this with the ‘Contract’ date which is the date the buyer submits the offer to the seller. It can take three hours to three weeks or more to finalize negotiation to obtain a ratified contract.
- The typical contract specifies that the seller will insure that all existing appliances, heating, cooling, plumbing, electrical systems & equipment will be in normal working order as of Possession Date. A typical home inspection contingency gives the buyer time to have one or more professional inspections. If the buyer’s inspection discovers any of these types of issues, they can provide notice to the seller to make repairs at the seller’s expense — no negotiation is required. The buyer can negotiate other items for the seller to repair or to provide a credit. Or, the seller can simply void the contract and have his escrow deposit returned.
- Once the home inspection contingency expires, a buyer cannot void a contract based on the home inspection contingency.
- In Maryland, a home buyer also has five days to review the community’s HOA documents. If the buyer doesn’t like the HOA’s restrictions, he can void the contract within this review period and have his escrow deposit returned. This contingency starts once the HOA documents are delivered which is typically soon after ratification date.
Typical Financial-Related Contingencies
- The buyer’s escrow is deposited immediately after ratification. This deposit is applied to the downpayment at settlement.
- The buyer is typically required to apply for financing within 7 days or less of ratification. Although the contract gives the buyer time, they really should have applied before the Contract Date. By selecting a loan officer and providing all information up front, they’re ready to go once a contract is ratified.
- A typical contract specifies the days allowed to get final loan approval for this loan. The loan’s underwriter will have reviewed the contract and verified the buyer’s income, debt, cash and credit scores. At this point, the loan is fully approved with a couple of conditions (proof of homeowner’s insurance, termite report, etc).
- If the buyer doesn’t obtain financing within the deadline, the contingency doesn’t automatically expire. This contingency will continues all the way to settlement. However, after this contingency expires, the seller can give the buyer notice to remove the contingency, or he will void the contract.
- The typical appraisal contingency works the same way. It will continue unless the seller gives the buyer notice to remove it, or the contract becomes void.
- If the appraisal comes in below the negotiated price, the buyer can proceed as is, or negotiate with the seller to accept a price no lower than the appraised value. The seller is not required to accept a lower price. If the buyer and seller can’t agree, the contract becomes void and the escrow is returned.
Steps Before Settlement
- The typical contract requires an inspection to verify the property is free of active termites or wood-destroying insects within 30 days of settlement. The property is also to be free of damage from insects. If these are discovered, the seller typically repairs this at the seller’s expense.
- If the property is on private well and septic, these inspections are also conducted within 30 days. The seller is required to deliver potable water and a working septic to the buyer and must make any repairs at this expense if needed.
- Although not specified in the contract, the buyer and seller notify the utilities of the upcoming change in ownership.
- Lastly, just before settlement – that day or the day before – the buyer takes a final walkthrough of the property. The main purpose of this walkthrough is to insure the property is in the same condition as it was on ratification. If any of the systems, electrical, etc aren’t operational, this is the last opportunity for the buyer to have the seller resolve the problem.
These are the steps in a typical contract, but the process can be more or less complicated given the specific terms negotiated. For example, a seller could rent-back from the buyer after settlement, there could be additional inspections, the buyer could have a home to sell, etc. Buyers and Sellers benefit from experienced representation to insure that their contract protects their interests and needs.
Contact us anytime with questions on structuring a contract or the real estate market in Montgomery County.
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Montgomery County Closing Costs and HUD1 Overview
October 1st, 2009 Categories: Buying, Selling
Perhaps the best way to understand the costs required to buy and sell a home is to understand the HUD1. This is a standard two-page document that details all expenses and credits for a home sale. This video walks through a HUD1 so you can understand the basics:
Closing Costs Estimates for Buyers
Here’s the top four expenses for home buyers in Montgomery County, Maryland:
- Transfer and Recordation Taxes. The state of Maryland and Montgomery County collect taxes that total between 2.2% and 2.5% of the total purchase price. This is typically split between buyer and seller, so estimate this at 1.2% of the purchase price.
- Title Insurance. This insurance protects you and your mortgage provider from any defects in title which crop up after settlement. The details of a title insurance is an article on it’s own. I find that 0.4% of the purchase price is a good estimate.
- Prepaids and Escrow. Escrow accounts to pay for future property taxes and insurance will be setup. The amount of property tax that you’ll pay at settlement depends on the timing of settlement.
- Loan Charges. I typically see around $700 for an appraisal and $600 for underwriting and document preparation. However, this can vary widely by mortgage providers. When comparing different loan programs, don’t simply compare the total closing costs estimated. Item’s 1 – 3 are calculated by the settlement attorney and will be the same regardless of the mortgage provider. Details of this item will be covered in a separate article.
A buyer will have other charges at settlement that often total between $1,000 and $2,000.
Closing Costs for Home Sellers
Costs for home sellers are more straight forward:
- Brokerage Fees. This is the fee that compensates the listing and buyer agent to market, service and eventually close a sale. The amount of the commission is negotiated between the broker and homeseller and is typically between 5 and 6% of the sales price.
- Transfer and Recordation Taxes. Assume this is split between the buyer and seller, so estimate 1.1 to 1.2% of the sales price .
- Mortgage Payoffs. All loans secured by the home’s title – including all home equity loans – are paid off at settlement.
Understanding costs associated with buying and selling in Montgomery County is essential when planning a sale. Contact us anytime when planning your next move.
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True Story: My Realtor Gave My Home Away
July 16th, 2009 Categories: Selling
Less than two years ago we listed our home for sale with an area “Top Producer”. Just 13 months earlier, they sold a home in our neighborhood that was very similar to ours’ — same floor plan, same builder, 2 acres, 3 car side-load garage, 2 fireplaces, big bright basement, etc. They implemented a great marketing plan and were able to sell “Home A” for $1,125,000 in only 67 days. So for us, having these guys sell our home – “Home B” – was a no brainer. We soon discovered that our experience would be quite a bit different. Did we make the right choice?
We were the perfect sellers
I have to admit, we were great sellers. We did everything needed to make the house shine. Everything was mulched, we threw out tons of stuff (how much plastic can two kids collect?), put in a new front walk, added granite counters to the bathrooms, etc. And, even more important, we realistically priced it for $1.1M. Home A was nice, but ours had a better lot, more landscaping and awesome floor-to-ceiling built-ins in the family room. So although comparable, I can objectively say that ours was just a little better. Honestly, it was.
Our real estate agents weren’t delivering
When our home entered the market, initial interest was OK, but we didn’t get the same interest as Home A. After about a month our showing activity really slowed down. Our agents were doing all of the same things as for Home A, so what was the problem? Our house looked great and it was priced right, so why weren’t buyers coming through?
To get to the heart of the matter, our agents reviewed the details of our competing homes. These were others on the market that our buyers would also likely consider. Our challenge, according to them, was that competing homes were priced about the same or lower. And these homes were also not selling. The solution – lower the price to better compete.
Do these guys make this stuff up? If the house is in great condition and priced ‘right’, why unnecessarily reduce the price? Isn’t that just giving money away?
Price is really important
When we reviewed competing homes we agreed that our price was too high. Our neighbor’s sale the previous year really didn’t matter. At that moment in time, a buyer had quite a selection of homes with attractive attributes. Some had better locations, one was all brick and one had an amazing kitchen. With this insight we brought the price just below $1M which helped increase traffic and interest. We did get a contract that fell apart when the buyer got cold feet, but we were definitely closer to the right price.
Still, after a couple more months, inventory for homes like ours was climbing with no end in sight. And we still didn’t have a contract. To be more competitive, our agents recommended that we reduce the price further, so we aggressively priced it at $938,500. We got even more interest at this price. After very tough negotiations, we were able to sell it for $916,000. Our home had been on the market for six months.
Morals of this tale
OK, it’s time to confess. We were the real estate agents “hired” to sell our own home. Of course we know the importance of a home’s price and condition. Still, this was an important process for us that reiterated some universal truths of real estate.
- The current real estate market determines your home’s value. Buyers look at your home in the context of other homes on the market. Past sales do matter, but only to a point. In a market with a lot of inventory, a buyer will be attracted to the best values — the homes in the best condition with the best price.
- Testing the market has risks. Just like with our sale, our goal is to get the very best price for our clients. Often we support our clients desire to ‘test’ the market with a higher, reasonable price to help get the highest sale. As our case showed, this can be risky in a buyers market. Could we have done better by listing our home for $950,000 right out of the gate? Very possibly, but our market was changing a lot at the time. We didn’t want to leave $100,000 on the table by initially pricing too low since we didn’t have an immediate need to sell. This was a risk we were willing to take.
- Home improvements are important, but price is still King. Buyers are attracted to the best homes. In any market, a seller should make improvements that remove buyer objections and give a home a new and fresh feeling. In a strong buyer’s market, understand that it’s much harder to get a return on more expensive improvements. At the end of the day, you’ll still be negotiating on price. In our case, some expensive improvements ultimately had no affect on our net proceeds. Were we to do it over again, we wouldn’t have done as much and saved some money.
No regrets
Even though we sold our home significantly lower than our neighbor’s home, we believe that we got a great price and have absolutely no regrets. On the surface, it may appear that we gave our home away, but we didn’t. We got a fair price in market at that time. Do we ever think “if only we had sold a year earlier”? Never. We didn’t have a need to sell then, so it didn’t matter. Worrying about “what could have been” is not a productive exercise. Do the best with cards you are dealt and always move forward. This has also been one of our key philosophies which was also reconfirmed by this experience.
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Are you thinking about selling? Call us at 301-527-9079 or send an email to schedule a complementary home valuation and to discuss the real estate market in your area.
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The Grand Canyon can separate buyer and seller expectations
January 31st, 2009 Categories: Buying, Selling
Two very different perspectives
Buyer: The market hasn’t been this bad in 50 years – everything is totally overpriced
Seller: My house is special. My house is unique. My house has a high value. I’m not giving it away.
Right now in Montgomery County, the gap between buyers and sellers can be like the Grand Canyon. Who’s on the right side? The answer is somewhere in the middle.
Good News for Buyers – Our Market is Relatively Strong
How can a strong market be good for buyers? The lower the price the better, right?
Once you make a purchase, you’re no longer a buyer, but a homeowner. Paying more for a home that holds its value better is definitely a good thing. Still, I see many buyers who are uneducated about Montgomery County real estate and are overwhelmingly pessimistic about our market. They make low purchase offers based only on the home’s asking price without regard to recent sales activity. This isn’t a good strategy to be successful. Here’s what buyers should do in today’s market:
- Markets are very different in Montgomery County; some are much stronger than others. Really get educated on your areas of interest.
- See homes in person. Checking out virtual tours on the internet isn’t enough. You need to see, touch and experience homes in person. Even though there are many homes on the market, there’s only a few great ones. Know the great ones when you see them.
- Know the sales prices of homes you’ve seen. Don’t just rely on sites like Zillow that attempt to estimate home values through computer algorithms.
- Take your time and find the right home that meets your needs.
As you become a true market expert, you’ll be confident when moving forward with a purchase offer. If the seller’s list price is too high, you’ll have data to support a lower offer. If it’s too low, you’ll be ready to act quick.
Attention Sellers – It’s not 2005
It’s easy for sellers to assign a ‘mental value’ to their home and make plans for the proceeds based on this value. When it comes time to sell, their mental value rarely reconciles with a realistic market value. Most sellers we meet are fair and level-headed so we can have a rational discussion about home pricing. For others, their mental value is set in concrete which can’t be changed with any amount of data. No one wants to give their home away, but setting a realistic list price is essential to a successful sale. Here are a few good guidelines for Montgomery County home sellers:
- Know that buyers will compare your home to others on the market. Your perceived value or plans for proceeds have absolutely nothing to do with a buyer’s perception of your home’s value.
- Your list price should be based on recent sales of comparable homes. “Comparable” is the key word. These are homes of similar size, age, style, condition and area.
- Price your home relative to your competition. Buyers will see your home with other similar homes in the area. For declining markets, you need to price below the competition. In stable and appreciating neighborhoods, you can price comparable or higher than other homes. Know they dynamics in your market and price accordingly.
- Appraisals aren’t a cake walk. So even if you receive a higher offer, your home must appraise for the sales price or you’re renegotiating a lower price.
Bridge the Gap
Buyers and sellers come together by being educated about our market and setting realistic expectations. A great place to start is to setup Montgomery County email alerts for homes in your area and price range. Contact us anytime for a detailed analysis for your areas of interest.
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Got ghosts? One thing a home seller isn’t required to disclose in Montgomery County
January 13th, 2009 Categories: Buying, Selling
Home sellers in Montgomery County, Maryland have to disclose a lot. They have to tell prospective buyers about any roof issues, plumbing problems, presence of lead, current taxes, estimated taxes, easements located on the property, and more… much more. Starting in 2009, home sellers must also disclose their energy consumption. When energy costs soared and gas hit $4 a gallon (remember those days?), the Montgomery County Council conceived legislation that would require sellers to perform a complete energy audit before listing a home. Given the impracticability of implementing this legislation, the final bill only requires sellers to disclose past energy usage.
Disclosures are a good thing that protect the buyer and the seller. In Montgomery County, the disclosure package is a daunting stack of paperwork that attempts to cover every scenario. Is this new disclosure worthwhile? I believe a buyer should view this information with a critical eye. A home’s energy usage can be a better reflection of the homeowners’ lifestyle than its energy efficiency. The buyer’s home inspector’s assessment on the efficiency of key systems (furnace, A/C, windows, insulation, water heater and appliances) should also be considered when evaluating a home’s energy efficiency.
So what’s this got to do with the presence of paranormal activity in a home? For exasperated home sellers who cry out loud “Could I possibly be required to fill out another form to sell my home?”, take heart. We don’t have a form that requires you to itemize the presence of dead clowns, unspeakable evil or other paranormal entities that reside in your home like in the following video. Still, if you hire us to sell your home, we would really appreciate a “heads-up” so we are adequately prepared to answer any questions from buyer agents who show your property.
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